US stock market

The US stock market has started 2026 on a strong bullish note, extending the momentum from a solid 2025 where the S&P 500 returned approximately 17.9%. Major indices have hit multiple record highs in the first week of trading:

• S&P 500: Closed at ~6,966 on January 9, up ~1.6% for the week and ~1-3% YTD.
• Dow Jones Industrial Average: Closed at ~49,504, up ~2.3% for the week and crossing 49,000 for the first time.
• Nasdaq Composite: Closed at ~23,671, up ~1.9% for the week, driven by AI optimism.

Key drivers include:

• Ongoing enthusiasm for AI and expectations of productivity gains.
• Broader market participation, with small-caps (Russell 2000 up >4% YTD) and value stocks outperforming growth in recent sessions.
• Rotation out of mega-cap tech into cyclicals, defense, homebuilders, and financials.
• Supportive policy expectations: Federal Reserve rate cuts (three in 2025, projections for two more in 2026), fiscal stimulus, and deregulation under the Trump administration.

However, risks persist:

• Persistent tariffs contributing to inflation above the Fed’s 2% target.
• Geopolitical uncertainties (e.g., Venezuela developments boosting energy stocks temporarily).
• Elevated valuations in parts of the market.

Bonds: The 10-year Treasury yield hovers around 4.18-4.19%, with longer maturities under slight pressure from inflation concerns.

Commodities:

• Gold remains strong near $4,510/oz, supported by safe-haven demand and central bank buying.
• Oil (Brent ~$63, WTI ~$59) faces downward pressure from oversupply.

Crypto: Bitcoin around $90,000-92,000, showing volatility but resilience amid institutional interest.

The economy shows resilience with above-trend GDP growth in late 2025, though labor market softening (unemployment ~4.4%) and sticky inflation (~2.4-2.7% projected) warrant monitoring.